Indian Rupee gains vs US Dollar on Reform Push

TNI Bureau: The rupee today gained 33 paise to nearly six-month high of 51.41 against the dollar in early trade on strong capital inflows and a firming trend in the equity market after the government unleashed second wave of reforms yesterday.

In a significant development the Government of India unleashed a second wave of reforms deciding to open the pension sector to foreign investment and fix a cap of 49 percent of Foreign Direct Investment (FDI) in the insurance sector raising it from 26 percent.

The Finance Minister P Chidambaram clarified that the enhanced FDI cap in insurance and pension would not apply to public sector entities.”Public sector insurance companies will adopt government policy and will remain public sector companies,” he added.

In addition to that, the new Companies Bill will be a thorough overhaul of the existing laws while the Competition Act seeks to bring all sectors under its purview, except involuntary mergers in sectors like banking and insurance which are already regulated.

Meanwhile, Forex dealers said, persistent dollar selling by exporters and banks and weak American currency against the euro also kept the rupee strong.The rupee had gained 42 paise yesterday to close at over 5 and half month high of 51.74 against the dollar.

The rupee strengthened by 15 paise to Rs 50.23 per US Dollar in early trade on the Interbank Foreign Exchange on Thursday on dollar selling by exporters and capital inflows.

However, the Dealers points out that Euro’s gains on IMF plans to expand its lending resources to counter Europe’s debt crisis against the American currency overseas, also kept the rupee gaining against the US dollar.